Funding crucial to pig cell treatment's future

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New Zealand firm Living Cell Technologies says it will have to educate the Russian market before it can start selling its ground-breaking pig cell transplant treatment for diabetics there mid next year.

The Australian-listed company on Friday gained registration for Diabecell, the world's first xenotransplantation (animal to human) treatment approved for sale in a Westernised country.

Its Russian subsidiary, LCT Biomedical, was set up last year to commercially develop the treatment in Russia after two years of clinical trials on eight patients showed six had substantial long-term improvements in blood glucose control.

That meant they could reduce their daily injections of insulin. Two patients were able to stop injections entirely for two months.

Managing director Ross Macdonald said the small company didn't have enough money to set up distribution before registration was achieved.

"In an ideal world we would have done a lot of work prior to getting registration but there is always the risk of, `What happens if we don't?' We can't afford to waste money."

He said it would now familiarise the market with the product, including managing expectations of type-1 diabetics of what the treatment could achieve.

"This is not a cure," Mr Macdonald warned.

Insulin-producing cells are taken from rare Auckland Island pigs the company breeds near Invercargill and injected into the pancreas of test subjects with type-1 diabetes. Living Cell Technologies founder, scientist Dr Bob Elliott, has previously described the herd as "pig gold".

New Zealand is the second country the company hopes to commercialise the product in and phase-two trials here are expected to be completed early next year. Patients have so far shown fewer complications from their diabetes, most notably a big reduction in potentially fatal seizures.

Phase-three trials are expected to begin later next year in several countries, with a view to selling the treatment globally by 2013.

Living Cell has been forging relationships with health centres overseas to conduct the trials and these centres will also distribute the product once it goes on sale, its annual report says.

The company has signed a two-year exclusive worldwide licence with Johnson & Johnson subsidiary Centocor for Living Cell's encapsulation technology in a specific field of use.

They are also collaborating on research.

The sticking point will be raising enough cash to conduct the pivotal phase-three trials which will cost a lot more than the "$2 million" that Mr Macdonald said the loss-making company had sitting in the bank.

How much is uncertain until it's clear how many patients will be required in the trials.

Living Cell Technologies has so far had about $4.5 million in grants from the New Zealand government and $500,000 from the global Juvenile Diabetic Research Foundation.

"We'll need a capital injection to keep going," Mr Macdonald said.

Whether that involves more grants, a shareholder injection, or bringing in a new partner to help commercialise the product is still to be determined.

The annual report says Living Cell Technologies raised A$6.7m in 2009 from shareholders, who include Stephen Tindall's KOne WOne investment vehicle and David Collinson, who originally funded the company because he had a diabetic son.

One of the benefits of getting registration in Russia and nearing the end of the phase-two trials will be attracting more attention from the big pharmaceutical companies, Mr Macdonald said.

"For big pharma to want to get into bed with a little guy like us they want to have the data and know it is more than just a great idea and a spark in your eye."

The diabetes treatment is the most developed of Living Cell's projects, with research also being done into the use of cells for the treatment of Parkinson's disease, stroke, hearing loss and Huntingdon's disease.